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Income Tax Appellate Tribunal, BENCH ‘B’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ORDER Per N.V.Vasudevan, JM
Revenue directed against the order dated 04.01.2013 of CIT(A)-XXXVI, Kolkata, relating to AY 2009-10. The Assessee has filed Cross-objection being CO No.55/Kol/2013 against the very same order of the CIT(A). (Revenue’s appeal) 2. Grounds of appeal raised by the revenue read as follows :- “1. That the Ld.C.I.T.(A)-XXXVI,Kolkata erred in allowing Truck Running Expenses of Rs. 10,18,291/- as the principal expenditure of the assessee has been debited under the already debited truck running expenses which the material facts on record.
2. That the Ld.C.I.T.(A)-XXXVI,Kolkata erred in allowing Go-down Expenses of Rs. 7,42,641/- as this expenditure of the assessee not relatable to business since the assessee has no closing stock or businesses of any trade materials which is facts on ITA No.580/Kol/2013&C.O.55/Kol/2013-M/s.Transport Development Corpn. A.Y.2009-10 record.
3. That the Ld.C.I.T.(A)-XXXVI,Kolkata erred in allowing Retainership Fees of Rs. 6,49,275/- as this expenditure of the assessee not relatable to the business of the assessee since assessee having transport business with its own vehicles not require to pay any amount towards retainership.
4. That the Ld.C.I.T.(A)-XXXVI,Kolkata erred in allowing Transportation Charges of Rs. 14,49,755/- as this head of expenditure are made in the name of same party on the same day and also Transport Charges and Truck Running Expenses of Ledger entries are similar in nature.
5. That the Ld.C.I.T.(A)-XXXVI,Kolkata erred in allowing Loan Amount Charges of Rs. 8,54,000/- as this loan documents have not been substantiated by assessee in addition to existing loan.”
3. The Assessee is a partnership firm engaged in the business of transportation. For A.Y.2009-10 the assessee filed return of income showing total income of Rs.3,05,174/-. Assessment was completed by AO by disallowing certain expenses and determining the total income of the assessee at Rs.1,45,58,900/-. Most of the additions made by AO were deleted by CIT(A) giving rise to this appeal by the revenue before the Tribunal.
4. As far as ground no.1 raised by the revenue is concerned the facts are that the assessee claimed a sum of Rs.1,01,82,908/- as truck running expenses. The same was claimed as deduction while computing income from transportation business. In the body of the order of assessment, the AO wanted to disallow 10% of the truck running expenses on the ground that no documents were file in support of the expenses and that fuel charges was not included in the truck running expenses. However while computing the total income AO added the entire sum of Rs.1,01,82,908/- to the total income of the assessee. However in an order u/s 154 of the Act dated 16.01.2012 this mistake was rectified and the disallowance was restricted to Rs.10,18,291/-.
5. Before CIT(A) the assessee pointed out that the truck running expenses was incurred in respect of vehicles owned by the assessee which were 28 in number. The &C.O.55/Kol/2013-M/s.Transport Development Corpn. A.Y.2009-10 assessee pointed out that no expenses in respect of hiring vehicles were included in the truck running expenses. The assessee pointed out that out of total expenses booked under the head truck running expenses, expenses on fuel constituted about 85% to 90% and the remaining sum was wages paid to the drivers and kalasis and truck repairing expenses and other miscellaneous incidental expenses. It was submitted that these are usual and normal expenses. It was argued that no part of the expenses ought to have been disallowed by the AO. CIT(A) accepting the contentions on behalf of the assessee deleted the addition made by AO.
The learned DR relied on the order of AO. Before us the learned counsel for the assessee placed a chart showing that the truck running expenses from AY 2007-08 to A.Y.2011-12 and the turnover of the Assessee in the business of transaportation. The comparative chart of the expenses given by the assessee is given as Annexure to this order.
After considering the rival submissions and on a consideration of the comparative chart, we find that the truck running expenses claimed in this AY is commensurate with the turn-over of the assessee compared to A.Y.2010-11 and 2011- 12. The truck running expenses from A.Y.2007-08 to 2011-12 shows the increasing trend. This increase in the percentage of the expenses to the turn-over is understandable and commensurate with the rate of inflation. No adverse inference ought to have been therefore drawn against the assessee. We therefore are of the view that CIT(A) was justified in deleting the addition made by AO.
As far as ground no.2 raised by the revenue is concerned, the facts are that M/s. Philips India Ltd had taken on rent the premises being a godown at Village Balongi on Kharar Road in the District Ropar within the state of Punjab. They appointed the assessee as clearing and forwarding agent under an agreement dated 01.12.2004. As per the terms of the agreement, the assessee was to employ workmen and staff for maintaining the safety and security of the godown, storing, keeping and handing of the &C.O.55/Kol/2013-M/s.Transport Development Corpn. A.Y.2009-10 goods in safe condition in the godown and keeping proper accounts loading and unloading of the goods to and from the godown to different dealers. For performing the aforesaid job the assessee incurred expenses to the tune of Rs.7,42,641/-. These expenses were booked under the head “Godown Expenses”. The AO was of the view that since the assessee by the very nature of his business was required to have any stock of goods there was no necessity for having a Godown. Accordingly he disallowed the claim of the assessee for deduction of the aforesaid expenses.
On appeal by the Assessee, the CIT(A) after going through the agreement between the assessee and M/s. Philips India Ltd found that the contentions of the assessee that these expenses though booked under the head “Godown expenses” were by its nature allowable expenses and related to the business of the Assessee. The CIT(A) therefore found the explanation of the Assessee to be acceptable and accordingly deleted the addition made by AO.
Considering the material available on record and agreement between the Assessee and M/S.Philips India Ltd., we are of the view that the expenditure in question was for the business of the Assessee and the order of CIT(A) on this issue does not call for any interference. Accordingly ground no.2 raised by the revenue is dismissed.
As far as ground no.3 raised by the revenue is concerned the facts are that the AO disallowed a sum of Rs.6,49,275/- which were paid as retainer fee by the assessee. According to the AO the assessee was in the business of transportation and there was no necessity of payment of a retainer fee as assessee used its own vehicle for transportation.
Before CIT(A) the assessee pointed out that the payment of retainer fee was payment made to casual labourers engaged in the process of loading and unloading of goods at various places. These were in the nature of wages and are not paid to persons who are in the regular pay roll of the assessee. This was the reason why the &C.O.55/Kol/2013-M/s.Transport Development Corpn. A.Y.2009-10 nomenclature “retainership fees” was used while accounting for the aforesaid payment. The real nature of the payment was in the nature of wages and had to be allowed as deduction. The CIT(A) accepted the contention of the assessee and allowed the claim of the assessee.
The contention of the revenue before us was that since the assessee was having its own vehicle there was no need for any retainer fee. In our view this contention of the revenue is not acceptable because the nature of this fee is wages and not any retainer fee paid in the process of transportation. We therefore do not find any reason to interfere with the order of CIT(A). Consequently ground no.3 raised by the revenue is dismissed.
As far as ground no.4 raised by the revenue is concerned, the AO found that transportation charges of Rs.14,49,755/- had been made to the same party on the same day. He was of the view that these expenses were pertaining to truck running expenses and ought to have been included therein. The AO accordingly added the aforesaid sum to the total income of the assessee.
Before CIT(A) the assessee pointed out that apart from its own truck the assessee had also engaged other parties for hiring trucks for its business. The assessee pointed out that the truck running expenses incurred by the assessee was different from transportation charges paid to other truck operators whose services were availed by the assessee on hire. The assessee pointed out that the nature of the two expenses are different and they were not properly appreciated by the AO. CIT(A) found force in the submissions made by the assessee and accordingly deleted the addition made by AO.
Before us the contention of the revenue is that the truck running expenses and transportation charges are one and the same. We are of the view that in the light of the evidence brought before CIT(A), the contention of the revenue cannot be accepted. Accordingly ground no.4 raised by the revenue is dismissed. &C.O.55/Kol/2013-M/s.Transport Development Corpn. A.Y.2009-10
As far as ground no.5 raised by the revenue is concerned, the AO noticed that there was an increase in the loan amount in the balance sheet of the assessee by a sum of Rs.8,54,000/-. Since the assessee had not filed any evidence to show the receipt of loan AO treated the aforesaid sum as unexplained and added the same to the total income of the assessee.
CIT(A) however deleted the addition by observing as follows: “The facts are that as per the Balance Sheet (liability side) the amount of "loans and advances" taken as on 31.3.2008 was Rs. 20,44,340/- which increased to Rs. 28,98,340/- as on 31.3.2009. The incremental amount was Rs. 8,54,000/-. The loans & advances pertained to 3 (three) parties. In respect of 2 (two) parties the balance as on 31.3.2008 and 31.3.2009 were exactly same without any change. The only loan alc. was with the sister concern M/s TDC Warehousing Corporation and it was interest free. The loan transactions with the sister concern were all by cheque and the same were duly accounted for in the assessee's books. Hence, addition made of Rs.8,54,000/- u/s. 69 is therefore deleted.”
The contention of the revenue before us is that the Assessee did not produce the loan documents to substantiate receipt of loan. We are of the view that in the light of the evidence to show that the loan amount was availed from the sister concern, the order of CIT(A) does not call for any interference. Accordingly ground no.5 raised by the revenue is dismissed.
In the result the appeal of the revenue is dismissed.
C.O.No.55/Kol2013(Assessee’s Appeal)
The grounds raised
by the assessee in the Cross Objection are as follows :-
1. That on the facts and on the circumstances of the case the learned CIT(A) had erred in confirming the arbitrary disallowance of Rs.2,88,549/- made by the AO in the assessment framed u/s 143(3)/144 of the Act, dated 28.12.2011, out of rates and taxes. “ &C.O.55/Kol/2013-M/s.Transport Development Corpn. A.Y.2009-10
As far as the grounds raised by the assessee is concerned, the facts are that the AO found that the assessee had claimed as deduction a sum of Rs.2,88,549/- under the head rates and taxes which sum was debited in the profit and loss account. This addition was made on the premise that there was no actual payment of rates and taxes and therefore the amount in question was disallowed by the AO invoking the provision of section 43B of the Act. The CIT(A) confirmed the order of AO on the ground that the assessee had not produced any evidence to show the actual payment of rates and taxes.
Before us the learned counsel for the assessee drew our attention to the submissions filed before CIT(A) wherein in Annexure-D a complete proof of payment of rates and taxes were furnished before CIT(A). These documents are placed at page nos. 181 to 227 of the assessee’s paper book. The break up of the expenditure is as follows :- Summary: Amount 1 TAX RENEWAL CHARGES 137,098.00 2 CERTIFICATE OF FITNESS 4,040.00 3 PERMIT RENEWAL FEES 144,261.00 4 Other Taxes 3,150.00 Total 288,549.00
The evidence recording actual payment have also been furnished before us. In the light of the evidence which was filed before CIT(A) we are of the view that the issue requires examination by the AO to verify actual payment within the period contemplated u/s 43B of the Act. We therefore set aside the order of CIT(A) on this issue and direct the AO to examine the claim of the assessee in the light of the evidence filed before CIT(A). The AO shall afford opportunity of being heard to the assessee. Accordingly the Cross Obbjeciton is treated as allowed for statistical purposes.
&C.O.55/Kol/2013-M/s.Transport Development Corpn. A.Y.2009-10
In the result the appeal of the revenue is dismissed and the Cross Objection of the assessee is allowed for statistical purposes.
Order pronounced in the Court on 11.05.2016.
Sd/- Sd/- [M.Balaganesh ] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 11.05.2016. [RG PS] Copy of the order forwarded to: 1.M/s. Transport Development Corporation, 132, Lenin Sarani, Kolkata-
1. 1. 2.I.T.O., Ward-56(1), Kolkata 3. CIT(A)-XXXVI, Kolkata 4. CIT-XXI, Kolkata.